Two young entrepreneurs aged 19 years old, who have previously worked together on several projects, including a ride-hailing app for school children and left Stanford last summer to start a startup, announced on Sunday that they had raised $60 million to disrupt India's highly competitive grocery delivery market.
Glade Brook Capital was the first round of institutional financing for Zeptos, Aadit Palicha, founder and chief executive of the startup, told TechCrunch during an interview. According to two sources, the round valued Zepto at between $200million and $300 million.
Zepto has been the talk in the area for several months. It launched its app six years ago and has been operating in stealth mode. Zepto, which plays with a mathematical term to describe its business, provides a 10-minute grocery delivery service and beats many other heavily-backed competitors on speed.
Zepto set up dark shops in the three cities it serves (Mumbai and Bangalore, as well as Delhi, which was announced this week). Palicha stated that these dark stores, which Zepto has established and now owns, have been optimized for speedy deliveries. Palicha stated that Zeptos' approach was different than many Indian startups, which rely on regular grocery shops for inventory.
He said that the potential is huge because of the way we're growing and the current penetration as well as frequency of usage. He said that the startup will soon expand to Hyderabad and Pune and Kolkata, as well as increase its number of dark-stores to more than 100 by next year.
Palicha said that the idea for Zepto was born when he and Kaivalya Volhra (the other founder), were trapped in Mumbai's homes last year due to the pandemic. Just recently, we had been exposed to the tech startup and entrepreneurial world in a very profound way. He said that the main problem we faced in Mumbai was getting groceries and other essentials.
Maharashtra, like all other Indian states, had instituted lockdown in order to stop the spread of the virus. This meant that deliveries took two to three days to reach customers. He said that we were very frustrated.
He said that we felt that the online delivery of Indian groceries was making some mistakes.
Zepto has a team of former executives from Flipkart and Uber, Pharmeasy and Pepperfry. It competes against a variety of startups, including SoftBank-backed Swiggy and Grofers and Google-backed Dunzo. Many of these startups have recently expanded into the fast food delivery market.
To perfect this model, we have been trying to ignore the noise and execute heads-down for a while. Our efforts are paying off. With an unstoppable team and robust product infrastructure, we are consistently growing by 200% each month, according to Palicha. We also have deep access to institutional capital.
According to Sanford C. Bernstein analysts, the opportunity is worth $21 billion by 2025. From less than 1% today, online grocery penetration is expected at 3-5% by 2025. The long-term structural drivers are still strong: increasing income and affluence; lower tier consumption; e-commerce penetration (30%CAGR); and a younger population (50% under 25). They wrote that grocery spending as a percentage of income is still high at 30%.
It is possible to increase penetration in high-traffic areas, convert more customers and retain customers. Online grocery adoption has increased as a result of increasing engagement and higher order volumes. DAU (daily active user) has experienced strong growth in many e-grocery app during lockdowns. Recent downloads have been increasing. Online grocery offers many benefits, including 24/7 shopping, large SKU ranges and same-day/next.
